Top 5 Physical Asset-Backed Cryptocurrencies

Today, it is relatively easy to invest in, exchange and utilize cryptocurrencies even if you're not familiar with blockchain technology and technical details of how and why it works. Cryptocurrencies backed by physical/traditional market assets such as gold, oil, and even real estate are making the scene even more accessible to old-school investors and institutions who are seeking that extra assurance of integrity when it comes to investing large amounts of capital.

In this article, we're showcasing the top markets that utilize cryptocurrencies and blockchain to either sell fractures of solid physical assets, or cryptos that are pegged to values as indicated by traditional market assets.

1. Tether (USDT) - Fiat currency-backed

If you're familiar with cryptocurrencies but you're not sure whether you've encountered any asset-backed cryptos as of yet, Tether, or commonly known as USDT is here to probably change your mind.

The most traded cryptocurrency out there based on liquidity levels would be USDT, outcompeting even Bitcoin in the last couple of quarters. USDT's price is backed by USD funds and assets in Tether’s reserves. Its total supply is not fixed, unlike most cryptocurrencies, but it increases or decreases periodically based on the amount of deposits or withdrawals in USD. This way, Tether’s exchange rate is as close to $1 as possible at all times.

While nowadays Tether is not the only stablecoin option, USDT is considered to be to stablecoins what Bitcoin is to altcoins.

In short, it is the first stablecoin ever introduced in the crypto market, and despite the controversy surrounding its operations in the past, USDT is one of the most popular cryptocurrencies among crypto traders and investors who are looking for a safe haven during uncertain times.

2. Digix (DGX) - Gold-backed

Digix is an Ethereum-based ERC-20 token and its price per unit is pegged with real Gold. More specifically, 1 DGX is equivalent to 1 gram of Gold, or ~49 DAI at the moment (an Ethereum-based stablecoin).

Digix was not only one of the first cryptocurrency projects to announce a gold-backed virtual asset, but it was the first to actually pull it off.

3. PAX Gold (PAXG) - Gold-backed

Another ERC-20 Ethereum-based token, PAXG is the latest creation of Paxos, the team behind Paxos Standard (PAX) - the second most popular stablecoin, only behind Tether in terms of liquidity.

Like DGX, PAXG is backed by physical gold bars. More specifically, the company works with UK gold broker Brink's where they hold in custody 400 Oz LBMA-certified London Good Delivery bars.

According to the firm, PAXG is the first regulated gold-backed token, being approved by the New York State Department of Financial Services.

4. Petro (₽) - Physical Reserve-backed

A government-backed cryptocurrency announced by Venezuela's President Maduro back in 2017, Petro, or Petromoneda, officially appeared in early 2018 and was supposed to be backed by the country's physical reserves, such as gasoline, oil, and diamonds.

Similar to Facebook's Libra, the Petro cryptocurrency went through a controversial series of debates between governments and financial regulators, in order to understand the vision of Maduro's claim in the digital realm.

In August 2018, President Maduro announced that the 'bolivar soberano' (essentially a Sovereign Bolivar - Venezual's native fiat currency) will be introduced and directly linked to the Petro cryptocurrency's value.

5. Real estate-backed custom tokens

Tokenizing physical and digital real-estate assets is becoming a popular way to create decentralized title entries for the housing market.

Decentraland (MANA) for example, offers the opportunity to buy and own virtual land that can be used in many different ways including being rented to a game developer studio or VR studio.

Blockchain companies such as Propy, or Bee Token, offer tokenization services for physical real-estate assets, essentially enabling smaller investors to get a chunk of a solid assets, instead of buying the whole deal.

That helps owners profit from their real estate in no time as they don't have to wait for that one single investor who would be willing to pay the whole sum right away. A group of smaller investors, whether they know each other or not, could invest in the same property, basically claiming a piece of the pie based on their contribution.

At the same time, the monopoly in real estate business is melting as housing can be now distributed in a decentralized fashion.

Some of the most popular real estate tokenization projects utilizing blockchain technology are based in NY and Dubai, and they are promising a big change in the way we treat physical real-estate assets.

Verdict

In short, backing your crypto with precious physical assets such as real estate, commodities like gold or oil, and even virtual land can help your project get international attention among traditional and conservative investors.

Regulating a cryptocurrency or relying upon its financial success becomes easier for financial watchdogs and investing firms, as a cryptocurrency backed by an already accredited form of investment can help shorten the bridge required by governments and lawmakers in order to understand a digital token's utility and functionality. This way, it can be subjected to pre-established frameworks, instead of trying to figure out how it works, why it works, and why people buy it.